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The China Policy Institute is a research centre based at the University of Nottingham focusing on all aspects of contemporary China, Taiwan and China's global engagement. The China Policy Institute does not privilege political positions and the views published in Analysis are those of the author.

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Shock and ore: Chinese interest in Greenland’s mines

Chinese mining in Greenland has triggered a political crisis and a good deal of geopolitical speculation, complete with indignant responses from the Chinese government and state-owned press. All that attention without any operations actually existing.

While interest in Greenland’s ores from government institutions and both state-owned and private enterprises reached a high point in 2012 or 2013, it has since receded. What remains is Jiangxi Copper’s low-key involvement in a copper project being explored since 2011, and China Nonferrous’ non-binding agreements with the owners of two different mines. One of these, the Kvanefjeld uranium and rare earth project, is moving towards production, but so far not a clod of commercial ore has left Greenlandic soil thanks to Chinese investment. The much-talked-about Isua iron mine near Nuuk lost whatever near-term prospects it still had with the demise of its operator. Last December it was sold, reportedly for a pittance, to General Nice (俊安), a private company whose Party connections once helped it navigate the Shanxi coal rush and emerge as a major iron trader in a market dominated by state-owned players.

Isua, from hot issue to cold asset

Although not a Chinese company, London Mining, the mine’s previous owner, had useful Chinese connections and had operated in China. The mine attracted considerable interest from both private and state-owned companies, and its prospects were praised by Chinese geologists who surveyed it. In 2013, however, talk of a large influx of Chinese workers to develop the mine brought about a media brouhaha and political crisis that likely set off the political-risk alarm for potential Chinese investors. London Mining’s other major asset, the Marampa mine in Sierra Leone, became nearly worthless after being hit by Ebola, eventually sending the company into administration in late 2014.

With current iron prices making the mine unattractive, Chinese industry voices have wondered about the motivations behind General Nice’s acquisition of Isua. Importantly, the company paid little for it, and not entirely in cash. Several signs suggest that General Nice might be going through a tricky liquidity situation: slow days for iron traders in China; a failure to complete a share subscription to IRC, who mine for iron in Siberia; another investment, Australian iron miner Pluton Resources, in trouble; their Hong Kong-listed arm losing more money than it made during its three years under General Nice’s aegis, and forced to diversify away from coal, historically its core business.

General Nice, originally a Tianjin trading company, joined the Shanxi coal rush around 1997, through a partnership with a local businessman and official who, among other positions, has held that of Party secretary of his village for 39 years. Political connections were indeed crucial to help the partnership navigate the free-for-all of the coal boom, occasionally supplemented with the odd bribe. Political clout might also have helped the group survive the state-ordered restructuring of the coal industry, one major goal of which was to fight the widespread corruption and environmental practices that put Shanxi towns like Xiaoyi 孝义 and Linfen 临汾, where General Nice operated, among the world’s most polluted. But General Nice too, eventually fell victim to the cleanup: the Hong Kong-listed company’s troubles largely stemmed from a failure to get environmental permits for a new plant, and state media shamed the company as a polluter as late as 2014. A move away from coal seems to be in order.

The Isua mine, a visible asset that fits a sought-after image as an integrated miner, can help General Nice pivot away from its crumbling core business without letting its diversification (from real estate to vineyards) blur its profile excessively. Indeed, the Hong Kong-listed arm’s recent acquisition of oil rights in the US, also for a bargain price mostly paid in company shares, suggests a similar motivation. At any rate, cheaply-gotten Isua could be worth cashing in at some point in the future.

Jiangxi Copper’s studied low profile

Although Chinese interest in Greenland mining goes back over a decade, the first actual deal was signed in 2009. Nordic Mining, the license holder for the Wegener Halvø copper site near Ittoqqortoormiit in east Greenland, turned to China after touting the project to Australian miners. Anthony Duckworth, a director with the company, travelled to Nanchang in 2009 and starred an event attended by high provincial officials, potential financial backers, and, crucially, Jiangxi Copper (江西铜业), the country’s top copper producer. The deal, however, was signed with a go-between, Jiangxi Zhongrun 中润 Mining.

Plans for Jiangxi Copper to get involved, though hard not to suspect and indeed talked about from early on, were not aired back then. Local journalists trying to ascertain who was behind Zhongrun were told the matter was “extremely sensitive“. Jiangxi Copper formally entered the project through a joint venture in 2011, but as late as 2012 Greenland’s Sermitsiaq newspaper was refused an interview by company representatives. Scattered Chinese sources, and seemingly none in the West, mentioned Jiangxi Copper’s involvement before my article on the topic in May 2013. The Greenlandic public had to wait until November that year to learn about the major actor behind the first Chinese project on the island.

Will the last be the first?

The Greenland project with Chinese participation most likely to start producing actual ores in the short term is not Wegener Halvø, the oldest, or Isua, the most talked about, but Greenland Minerals and Energy’s Kvanefjeld uranium-rare earth project in the island’s south. A partnership with national state-owned China Nonferrous (CNMC, 中色) began with a non-binding agreement signed in early 2014, and has been moving towards a more concrete form through multiple meetings between the companies since then. China Nonferrous had earlier signed a similar agreement with Ironbark, an Australian miner, for the Citronenfjord zinc project at the opposite end of Greenland.

Since the repeal of a ban on uranium mining in 2013, the project has been moving quickly and GME has recently announced that trial production could start before the end of this year. The company has also secured funding from a Hong Kong-based investor with Mainland connections. The partnership with China Nonferrous seems made in heaven: output from Kvanefjeld would be a perfect input for a colossal REE separation plant China Nonferrous is building in Xinfeng 新丰, Guangdong. China has a near-monopoly in global rare earth production, but a moderate amount of Chinese interest in REE deposits abroad (as recently seen in Greece) exists and fluctuates along with state policies affecting the industry. The close match between Kvanefjeld and China Nonferrous’ needs suggests a partnership with firmer foundations and somewhat less sensitive to such fluctuations.